François Villeroy de Galhau believes that the budgetary efforts requested in the finance bill may not have a recessionary effect.
“There is a slowdown but we do not see a recession for 2025.” Guest on the LCI set, the governor of the Bank of France, François Villeroy de Galhau, believes that France will avoid negative growth for the current year. He also confirmed the 1.1% increase in GDP in 2024.
In December, the institution lowered its growth forecast for 2025 to 0.9% compared to 1.2% in September. A significant point: the forecasts were made at the end of November, before the fall of Michel Barnier's government. Thus, François Villeroy de Galhau believes that political uncertainty should not fundamentally change the expected growth rate.
Reassure business leaders and the French
However, the situation is far from ideal. “There is budgetary uncertainty in France as well as international uncertainty,” he noted. The head of the institution thus underlined that the savings which could be requested in the 2025 finance bill would not be likely to stem growth. A position which is far from reaching consensus in the world of economists.
“We hear that if we tighten the budget, it will be to the detriment of growth,” he points out. “This time, it seems to me that this trade-off does not come into play. What we would gain by doing less budgetary effort, we immediately lost it on the side of uncertainty If we have not given ourselves a trajectory where we regain control of our debt, we worry business leaders and the French.
“We remain a powerful economy”
François Villeroy de Galhau thus underlined the importance of reducing the public deficit from 2025. “Our deficit is the highest in Europe,” he insisted. “We must bring it as close as possible to 5%.
The governor of the Bank of France, however, tried to send positive signals. “We remain a powerful economy but if we do not correct this budgetary trajectory, the debt will cost us more and more,” he said.
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